What Is Measured by Days' Sales in Receivables? Both Smith

question 160

Essay

What is measured by days' sales in receivables? Both Smith Enterprises and Jones Enterprises have credit terms of 2/10,net 30.The days' sales in receivables are 40 for Smith Enterprises and 35 for Jones Enterprise.Analyze this information.

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Definitions:

Contra Asset Account

An account on a company's balance sheet representing deductions from the gross amount of an asset, such as accumulated depreciation on fixed assets.

Allowance for Doubtful Accounts

An accounting method used to estimate the portion of a company's receivables that may not be collected, reducing the accounts receivable balance accordingly.

Uncollectible Accounts

Uncollectible accounts are receivables that a company deems uncollectable and likely will not be recovered, often written off as a bad debt expense.

Percent of Sales Method

A financial forecasting approach in which accounts are projected to increase as a percentage of the projected sales level.